Do Student Loans Help or Hurt Your Credit Score?

During college, many students don’t even think about their credit score. But they should! It’s a vital part of a person’s financial future, affecting a number of important milestones. Much of a person’s credit history starts in college. Specifically, with student loans. Credit scores can absolutely be affected by student loans. Your actions in the next few years can determine whether or not student loans can help or hurt your credit score.

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Student Loans Can Help Your Credit Score

Student loans can actually be a great way to start working on your credit score. Most students won’t be purchasing a car, buying a house, or making any other big expenses during this time period. A student loan, however, can work in your favor by helping you get your credit started early.

If you pay your student loan bills on time each month they’re due, you can absolutely see the results for years to come! In addition to a strong payment history, other benefits come in the form of the age of the credit, debt diversity, and debt levels. Of course, all this is predicated on consistent, on-time payments.

Student Loans Can Also Hurt Your Credit Score

When a lender does a “hard credit check” when you’re taking out a loan, your credit score can take a hit. It can be a necessary evil, as you’ll likely have to undergo a hard check in order to get the funds to pay for school. It’s definitely something to be aware of going in.

On the back end, student loans absolutely have the power to hurt your credit score too. Just like any bill, if you fail to pay on time, you could find the lender reporting you to the credit bureaus. A single payment may not have a huge impact, but failing to pay on time several months in a row can devastate your credit score.

If you are ever struggling with paying back your student loans, always reach out to the lender to see if anything can be done. Never just stop paying. This will absolutely hurt you worse in the long run. Sometimes if you call, they will work with you to create repayment plans or explore refinancing options. If the loans are from the federal government, they offer several repayment options.

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Some Loans Already Require You to Have Good Credit

While federal student loans don’t require good credit, private student loans do. If you don’t already have good credit before you apply, as is the case with most college students, you probably will have to have a cosigner.

It is possible to pass their credit check on your own. However, if you’re only slightly above their required credit score, you may qualify for a loan, but the interest rate will be higher. If this is the case, you might still want to look into cosigner options to keep interest rates lower.

So, Do Student Loans Affect Your Credit Score?

Yep. How student loans affect your credit score absolutely depends on your actions in the coming years, especially after you graduate or leave college. If you pay your loans on time each month, you will reap the benefits. Failing to pay though, whether late or not at all, can severely damage your credit, result in debt collector calls, and rising debt amounts. If you ever have trouble paying back your debt, don’t delay in calling the lender. It could just save your credit score.

Looking into refinance or consolidation options? Be sure to check out our review of the top lenders here!